Monday, December 9, 2013

December update

Yeah I'm still here. Haven't really been in the mindset to post much this year, although it has been my best performing year to date. I'm up about 63% from the start of 2013. It hasn't been the perfect year, one of the big mistakes was going long AUD for nearly -10% but I got lucky and got out at BE. Another big mistake was that -6% loss whilst trading on limited info on my third trip to Samoa. Right now I am rueing my decision to get out on a winning trade - into year end the markets have moved significantly in my favour after I got out 3 weeks ago. Lessons from 2013? * I need to get better at riding my winners and cutting my losers. * I improved at risk management this year. * But I need to get better at being aggressive when the right moment comes. * I've improved my control over over-trading. * I need to get better at understanding macro. * I also need to get back at systemising my analysis.

Saturday, October 26, 2013

Great guest post at Zerohedge. Premise is nothing can grow forever.

"What stage of the bull market are we in?" asks STA

"It is necessary to remember what was being said during the third phase of the previous two bull market cycles.
  • Low inflation supports higher valuations
  • Valuation based on forward estimates shows stocks are cheap.
  • Low interest rates suggests that stocks can go higher.
  • Nothing can stop this market from going higher.
  • There is no risk of a recession on the horizon.
  • Markets always climb a wall of worry.
  • "This time is different than last time."
  • This market is not anything like (name your previous correction year.)
Well, you get the idea."

Thursday, October 24, 2013

Monday, October 21, 2013

October update

No major news to report, apart from a 4% loss I copped whilst on holiday.  I was right about market direction (risk on premised on US deal getting done) but got the timing wrong by a day and a half...found out later I got screwed on flows which lasted a day. Lesson on the story, don't trade whilst on holidays.  Just take a proper break, reading some trading books, read some trading news, etc, but don't trade. You don't have all the usual luxuries of being in front of your habitual trading desk, so already you are handicapped. And you do yourself no favours either by cheating yourself out of a real holiday break.

Think this episode drags me back down to +45% for the year. So right now I'm taking a big step back, downsizing on my next trades, etc.  Been spending the last few weeks working on trader self-improvement. Thinking about market sentiment, expectations and crowd psychology. About economic fundamentals, technicals and positioning. About trade planning, personal emotional well being, trade execution and trade management. About global macro and turning an idea into a trade.

Lots of separate ideas and how to bring it all together into execution. Trying to systemize all of this thinking, and filter out unnecessary garbage. Lots of work to be done.

Thursday, October 3, 2013

Holiday update

Well it's been a month past and here I am sitting at Connexions Cafe in sunny Samoa.  Not much personal trading has happened as I haven't been able to find anything to act with real conviction. I think the biggest move has been the risk-on that developed about 3 or 4 ago, a rally that started from the bottom of the EURUSD channel finally piercing the top of the range recently. 

I wasn't really convinced by the recent strength, but clearly the numbers were adding up as the COT positioning now shows more investors piling into Euro and lightening up their USD longs. At the time I was kinda annoyed at not picking the change in sentiment, but for some reason I wasn't in a stable emotional state anyway so my judgement was cloudy had I traded with the rally I might have got out too early in any event.

I've had a solid year to date, up about 50% so far, so I don't have a real urgency to jump in. A recent 1.5% loss on Aussie a couple weeks back got me burnt, so I not wanting to throw away more money after half chances so soon. 

I get the feeling the market is in somewhat of a confused state as well. Taper is off, but could be on again in October, or in December as the market expects. I doubt December because of Xmas. ECB continues to be dovish, yet EUR is resilient. Market fundamentally ignoring the situation in Italy and Spain, while Portugal/Greece hardly rates a mention these days...underpriced risk? BOJ continues easing but brings in new sales tax hike to 8% from 5%. No strong feel for bonds and commodities, but I sense equities are going sideways after breaking all time highs recently (S&P, not Oz).

I don't really recall what happened this time last year, but I don't remember the euro summer holiday hangover persisting as long as it has been so far. There doesn't seem to be any sense of extreme urgency in the markets right now, and even the big ticket items like tapering seems to be baked in into the mid term.

So, everything's a bit boring but this means its an opportunity to catch up on the blog, trader self improvement reading, etc.

Sunday, September 8, 2013

Tuesday, September 3, 2013

Still sniffin around

...for a good deal. No trades in the past 5 sessions. The biggest move has been the unwinding of risk-aversion trades in this time.

Markets are definitely skittish still though, you can tell from its reaction to headline that a missile was fired in the Mediterranean. Traders gave their hand away as Gold & JPY went long, but promptly reversed the next candle when Mr Market decided it was all bullshit.

Apart from that, all the dailies are looking pretty choppy with no clear theme emerging in front of me.

If war in the middle east break, buy Gold, JPY, CHF, Oil. Don't even fuckin think, just hit the button.

Tuesday, August 27, 2013

Books cleared

Cleared the books for nearly +2%.  As soon as I did that, JPY rocketed some more...missed out on another 50-70p move...oh well, such is the life.

Technically the market is sitting on some pivotal levels, esp. in GBP. Gold is nearing resistance at 1420ish.

Short term, the market appears to be unconvinced taper will begin in Sept, but cautious as taper WILL begin at some stage. I suspect it's going to be more of the same sideways action the coming weeks until the next black swan news hits.

Emerging markets have been hit hard over the last few weeks, I don't know the driving force. I think the best thing to do next is to take a few steps back, retreat to the sidelines and watch from there for a bit.

Saturday, August 24, 2013


Back behind the desk for a week now, but nothing really inspiring going on.  JPY was probably the stand-out move of the week, but I did not pick up the market sentiment in time. I tried putting on a couple of basket smalls on USD/JPY strength beforehand, but scratched them before the FOMC to cut the risk as I was not confident enough that Taper will begin immediately.

Got up at 4am on Wednesday for FOMC, but what a friggin fizzler that was.

Late friday night on Bullard's comments that there's no hurry to start tapering, I put on a basket of anti-taper trades in USD & JPY vs EUR, AUD & GPB. Let's see how this goes.

Wednesday, August 14, 2013

On holiday

Made 6% long AUD last week, I got out at 91 Friday morning but it went to 92...oh well.

On leave this week, I'm disconnecting completely.

Friday, August 2, 2013

Updating my trading desk

I'm in the process of converting to a standing trading terminal, seeing as I am sitting or lying down 95% of the 168hr week. 

Next project is to get a 6 monitor setup going. 

Thursday, August 1, 2013

Great lessons from Anton Kreil (from Billion Dollar Day)

Some good lessons, particularly in parts 3 & 4

Part 5: "They will tell you things you want to hear, all the time. What people want to hear is that everyone can do it, its easy and you can make $10,000 a month trading the international forex markets...if you follow this line on a chart, yeah? (laughs) Complete nonsense. ... A lot of these people with conflicts of interest will tell you that stuff, but its obviously a lot more difficult than that.

Trading can be straightforward, but you've got to take an approach where you've got to be very cynical and a little bit angry at the world, because the rest of the world is there to take your money, right? (laughs)

So, if you're a little bit cynical and a little bit angry, it's a good basis to start trading. Because you're going to question everything. .... That's a very good basis in life anyway, but especially in trading."

Thursday, July 11, 2013

Massive move on DXY after the Fed send conflicting signal in last nights FOMC meeting.

Wednesday, June 26, 2013

Trade update

Cleared the books for 5.8% gain.

Made the same trades again today on an intraday basis, bought USD and sold JPY against EUR, GBP and AUD. Closed off all trades when support looks like holding for +2.9%.

Monday, June 24, 2013

Trade update

- books hit +6% in Asia but have come off slightly
- was expecting more aggressive USD selling during Asia but did not materialise?
- mindful of end of Q2 flows, but Sean Lee says should be broadly neutral, no word of large equity balancing so far

Thursday, June 20, 2013

Tapering Helicopter Ben

Huge developments this morning 4am Melbourne time, Ben Bernanke's FOMC meeting where he announced a more hawkish view than the market was expecting.

The market was looking for the Bernank to be ambivalent in general, maybe focus on the policy settings differences between tapering and interest rate hike, set the scene for eventual tapering in Q4. While these expectations were largely met, Bernanke also gave an optimistic outlook for the US economy, and clarified that 7% unemployment was the trigger level for any tapering to begin. I listened to the end of the FOMC meeting and the Q&A session after, and it was really more-than-expected optimistic tone that made the difference.

The markets roared, the USD soared.

Unfortunately I was not ready and too late to act on the first impulse, but started building USD long positions after the close of the Daily. I've gone long USD vis-a-vis EUR, AUD, GBP and even a little CNY for shits and giggles.

Here's the damage on the DXY:

Looking at the chart, it would seem there is still a fair bit of upside to come, I'm guessing over the next 10 to 15 trading days. The market's attention is now firmly fixed on tapering in September, and it would take some pretty bad USD data to turn this ship around.

Gold got hammered by the FOMC meeting, it cracked $1300 briefly. China too is having some troubles, their overnight repo rate hit 25%...the likes of which haven't been seen since the GFC of 2008. So all in all, everything points to risk off for the next while. I want to test my resolve in holding this trade as a macro trade, scaling in on winning positions. Let's see how far the ship can sail on this one.

Tuesday, June 11, 2013

New week, no positions after that AUD disaster from last week. Blind luck got me out of that countertrend trade -- I was suffering from 10% drawdown at one stage (just couldn't pull the trigger on those losses). I got the sentiment, the timing, the levels all wrong...very lucky to get out at break even after the markets went spastic.

The Last Week:
* Central banks stick to the script on policy, but the market decides that Draghi is hawkish* USD never recovers from soft early week data* Another bad week for the N225, a good one for the JPY
Alright, new week new outlook. Here we go.
* Calendars slow down in the coming week, and FOMC members stand back ahead of the June meeting* JPY traders will continue to watch the N225, though the intervention threat grows sub 95.00.* 1.33+ was short lived on EUR/USD, but calling a top tends to be expensive
  • Euro calm to start the week and feels like it is going to do nothing exciting anytime soon. 1.3300/20 remains good resistance but the lack of selling interest makes it look like we continue to grind higher. Dip buying remains my favorite strategy for the moment
  • German constitutional court ECB bond buying hearings, don't expect much but keep an eye out for headlines.
  • I will look to buy today on a dip to 1.3230, stop below 1.3170 for a run above 1.33. 
  • When all is said and done, we expect the Fed to maintain its $85bn monthly purchases unchanged into the middle of the first quarter of 2014, and the ECB to slash interest rates to negative levels by year-end. This may imply a neutral-to-strong US dollar, but with a higher confidence level play in selling the yen against both the dollar and euro.
  • The EUR whilst sidelined trades pretty well. The alternatives to owning the dollar are currently very limited and the EUR ironically is perhaps at the top of the list. 
  • The ECB is not engaging in QE, the notion of negative rates appears to be off the agenda and whilst Draghi will not welcome any currency appreciation the EUR should perform well on a cross basis. 
  • Against the dollar though I think it’s a tougher call and expect us to trade within a 1.31/1.34 range until further notice. Whilst flexible I favour buying dips and in terms of today’s parameters expect initial support at 1.3220 and then at yesterdays 1.3177 low, whilst the next resistance hurdle is offered by the 1.3307 post ECB high.
  • The price action says it all. Despite a move positive credit outlook on the US, EURUSD could not sustain sub 1.3200 and we have rebounded sharply to test again the 1.3300 level. 1.3300/1.3320 again remains critical resistance and a break through there looks like we could accelerate towards 1.3435. 
  • On the day 1.3245/50 should be good support and for now I believe that should be the buy zone and we are in a short term uptrend. Another very quiet data day both sides of the Atlantic so underlying themes are likely to dominate.
  • EURUSD BULLISH There is a strong resistance at 1.3342. A closing break above which would be positive over the longer term, opening 1.3520. Support is at 1.3178. 
Societe Generale
  • If you look at the EA GDP deflator, a broader measure of price pressures in the economy, inflation has not been above 1.5%, never mind 2%, since late 2008... When you have Draghi breezily dismissing the disinflationary trend across the region, you understand that the downside risks to European growth have increased..We therefore expect further down-shifts to EA growth expectations going forward. 
  • This would certainly follow the trend we have seen recently. SG economics believes that the response to weaker growth prospects is more likely to be an additional refinancing rate cut, than a negative deposit rate. 
  • Consequently, SG economics expects a 25bp refi rate cut to be back on the ECB agenda by year-end. Should the ECB feel the need for further rate action beyond that point, we would expect forward guidance to be explored as a tool. We remain bearish euro."
JP Morgan
  • EUR/USD our focus is now on key-Fib-support at 1.3120 (minor 38.2 %) which looks to be the decisive T-junction to distinguish between a still intact recovery to 1.3323/28 (weekly.-daily trend channels) and possibly to 1.3483 (minor 76.4 %) and the completion of a right shoulder top at 1.3305 on Friday. 

  • When all is said and done, we expect the Fed to maintain its $85bn monthly purchases unchanged into the middle of the first quarter of 2014, and the ECB to slash interest rates to negative levels by year-end. This may imply a neutral-to-strong US dollar, but with a higher confidence level play in selling the yen against both the dollar and euro.
  •  USDJPY BEARISH Upside will be viewed as corrective and unwinding the overextended downside conditions. Resistance is at 99.36 ahead of 100.40. Support is at 99.63 ahead of 

  • BoJ disappoints overnight as they don't "over deliver" this morning and make no change to their current easing policy.
  • Order book: Now a better net buyer down to 97.00, topside is dominated by light stop loss buying but nothing of significant size.
  • Sprint's vote on the Softbank offer (raised by 1.5 bio overnight) pushed back to June 25.
  • Market remains fairly choppy and with BoJ out of the way back to data watch mode. Nothing major on the radar today, retail sales and claims Thursday. Preference to buy a dip into mid to low 97.00's..
  • After a stronger close in USDJPY yesterday after S&P upgraded the US outlook, price action has tailed off again after the BoJ announcement where the CB kept monetary policy unchanged. They pledged to increase the monetary base at annual pace of JPY60-70tn and upgraded their assessment of the economy.  
  • The knee jerk reaction weighed on both USDJPY and the Nikkei and selling interest ensued with USDJPY, posting a low of 97.78. Since then both have recovered and we open the London session of a firmer footing around 98.25 and net buyers have been noted off the lows and the price action looks more upbeat. The BoJ press conference will begin at 7.30 with nothing untoward expected from Kuroda and USDJPY  is unlikely to break out of the 97.70-99.30 range for the day.
JP Morgan
  • Given the massive setback the JPY ran into since Friday the general conviction is certainly that the broader downtrend has been resumed. But for the latter to be confirmed and in order to eliminate the risk of just performing a countertrend B-wave rally it would take decisive breaks above minor 76.4 % retracements at 132.03 in EUR/JPY, at 154.75 in GBP/JPY and at 101.68 in USD/JPY.
  • Disappointment from the BoJ and the subsequent news conference by Kuroda, has seen USD/JPY fall again, along with risk in general. It feels that this is a phase of liquidation/capitulation, which may not be over yet. Further pressure on emerging markets, and equities continue cause pain. Think this is a case of staying nimble and pick your levels on an intraday basis. 
  • JPY gamma came off first thing today with the event risk out of the way, although as spot has carved a huge range over the session and continues to push lower everything is coming right back. 1 month was down to 15 from 15.55 before the BOJ, although this has retraced remarkably back to 15.5. It still seems the market is short some downside, and the vols will continue to hold up pretty well as the gamma has been performing. The 1 week was down to 16.5 from 20.5 last night, but these also have retraced now to around 17.25. 

  • With Asia EM under pressure and NAB business conditions weaker Aud tries key support under 0.9400 again. Holds for now but with bounces shallow look set for another attempt at some stage.
  • There is little reason to buck the trend at this stage so sell rallies remains the strategy of choice.
  • Labour force data Wednesday likely the next key determinant of near term direction.
  • NAB survey shows a mild improvement but not as much as many may have expected given the rate cut and fall in the AUD. Home loans similarly fairly subdued but the underlying trend remains positive. 
  • AUD continues to trade very heavily and trades through the 0.9388 2011 lows overnight with stops triggered induced by the fall in AUDJPY. The price action is compelling from a bears perspective but we are mindful still of the scale of positioning into Thursday employment report
  • Given the streets downward revisions to GDP forecasts and how much is priced for July’s RBA meeting the asymmetric risk remains for a stronger number, and given the volatility of the series that is a possibility so caution warranted. We remain short and a close below 0.9388 would likely encourage a fresh round of model selling. Topside yesterdays highs of 0.9481 the immediate resistance but the market not really looking to stop until the post payroll highs of 0.9675 now.

  • The UK housing market is gathering steam with the RICS house price balance showing sales at their highest levels since summer 2009.
  • Cbl inches towards last weeks high and eurgbp static.
  • We are short eurgbp but with the dollar once again under pressure it might be the case of further gains for cbl, good luck.
  • Massive move in green short sterling and out yesterday (-20bps at one point) and the move continuing today (greens -7bps now), much of which is some unwind of the Carney received positions but also in sympathy with the broader sell off in fixed income globally as treasuries push to new lows post the S&P upgrade on the US sovereign credit from negative to stable. 
  • Interestingly the move has yet to have any notable knock on effect in currency space (this time over a week ago the market was aggressively adding to long dollar positions) but today outside of AUD and JPY very little interest in G10 space. 
  • Regardless , the data set from the UK (another better RICS) continues to pick up off a low base and in cable 1.5680 / 1.5700 remains significant through which most of the cable bears would throw in the towel for those that still hold onto residual cash shorts. 
  • Intra-day given the inability of GBP to push on, cable should be a sell risking 1.5620 with EURGBP failing to gain any real traction below 0.8480. Orderbook however remains light and while we like the risk reward of being short pounds now it feels like we have one more wash out to come.
  • GBP remains well supported below 1.55, and I continue to see models cutting shorts. I think this demonstrates the extent of USD longs that remain out there, and so cable is a buy on dips for the time. The caveat to this is the data at 9.30, which will be closely watched. Offers now remain at previous post NFP high 1.5605/10 and then up towards the high of the squeeze 1.5685. GBP/commonwealths remain super bid and the trend is very much in place. I advocated buying 1.63 in GBPAUD and we now approach 1.66, and there is no reason to fight the trend. EURGBP remains a valueless wash.  
JP Morgan
  • Cable also remains vulnerable, but keeps the door open for a proper test of the main resistance zone between 1.5703 and 1.5784/88 (200DMA/C=A/61.8 %) as long as hourly trend line support at 1.5490 is not broken on hourly close.